New Jersey Gov. Chris Christie proposed a $34.4 billion
budget this afternoon that makes a required $2.25 billion payment to the public
worker pension fund without raising taxes, but said the state's staggering
retiree and debt costs are sapping spending increases for other programs and
services.

The governor's fifth budget proposal is in some ways his most
constraining. With an annual pension obligation that grew by roughly $600
million over this year, debt payments of nearly $3 billion and steeply rising
health benefit costs, Christie has virtually no wiggle room to fund major new
initiatives.

Taken together, retiree and debt costs will eat up 94 percent
of the state's projected revenue growth.

"While this budget continues the fiscal discipline and
pro-growth policies that we brought to Trenton
four years ago, the budget doesn't do everything we all might have wanted,"
Christie said. "Not even close."

The spending plan for the fiscal year that starts July 1
offers slight increases in K-12 and municipal aid, and increases higher
education funding by $159 million, or about 8 percent. The budget also includes
$5 million to allow some districts to implement longer school hours. Property tax
rebates would be maintained at current levels for those who are elderly,
disabled or earn less than $75,000 a year.

But the budget does not include plans for a tax cut, a
Christie proposal of two years ago that was thwarted by Democrats. And, it all
but abandons earlier administration efforts to privatize certain services.

The Republican governor and possible 2016 presidential
candidate linked rising retiree costs to the state's inability to adequately
address other priorities such as education, tax relief and drug rehabilitation.

"We just can't raise taxes enough to pay for the exploding
costs of public employee pensions and benefits, not to mention the burden it
would place on our already overburdened taxpayers," Christie said. "Without
additional reforms, New Jersey
taxpayers still owe $52 billion to fully fund the pension system," he said.

Christie, 51, said changes adopted during his first term didn't
go far enough, but he did not propose any specific new initiatives. Assemblyman
Declan O'Scanlon, a Republican who is on the budget committee, said the
governor was intentionally vague in the speech because he wants to start a
conversation about how to contain retirement costs, not dictate policy.

Dems: No pension talks

Leaders of the Democrat-controlled state Legislature said
they were not interested in revisiting pension changes. "We've done what we
need to do with the pension system," Senate President Stephen Sweeney said
after Christie's address. "We need to stay the course."

Sweeney and other Democratic leaders said the state has long
known what increased pension contributions will cost. Rather than changing
benefits for public employees, they said the state needs to focus on growing
the economy and creating more jobs, which would lead to higher revenue for the
state.

Christie helped cement his national reputation by taking on
public employee unions. Reforms enacted during his first term require public
employees to pay more for benefits, postponed cost-of-living increases for
retirees and forced the state to start paying into the fund after years of
skipping payments. The powerful teachers union spent millions in ads in an
unsuccessful attempt to defeat the proposals.

Scandals still loom

But this year is markedly different than others Christie has
faced.

The Republican's administration is mired in scandals that
have hobbled the start of his second term and threaten his future political
plans. Christie's difficulties have cut into his job approval rating and
emboldened Democrats, who have become less likely to go along with the governor's
proposals.

Allegations that Christie aides threatened to withhold storm
relief funds from a severely flooded town unless its mayor approved a favored
redevelopment project and that other aides intentionally blocked traffic
leading to a heavily traveled bridge as political payback are the subject of
multiple investigations.

The administration has denied the storm aid charges and the
governor has said he had nothing to do with the planning or execution of the
lane closures.

Record pension payment

Christie's
proposed budget makes a record $2.25 billion contribution to the fund in the
budget year that begins July 1, which is the amount required by law but just
over half of what the state actually owes.

Some 78
percent of that goes toward the state's unfunded liability, accumulated by
years of the state skipping its payment and the agreement to enhance retirement
benefits without having the means to fund the change.

The
current budget is another source of potential shortfall, as revenues are
lagging projections by about $250 million seven months into the fiscal year.
State Treasurer Andrew Sidamon-Eristoff said revenue is expected to pick up in
the last five months of the year. The additional revenue will be used along
with unspent allocations from last year to ward off late-year cuts to the
current budget.

Christie
is scheduled to take his fiscal proposal to residents at a town hall meeting
Wednesday in Morris County and then to a radio audience on
Wednesday evening.

A balanced
budget must be approved by the Legislature before July 1.

***

NEW JERSEY BUDGET PROPOSAL

Highlights of the New Jersey
state budget that Republican Gov. Chris Christie proposed today for the
fiscal year starting July 1 include:

TOTAL SPENDING: $34.4 billion, which is up by
$1.2 billion over the current year's adjusted budget. If it passes at this
size, it would be the state's largest budget ever and the first since the Great
Recession to eclipse the fiscal 2008 spending total of $33.6 billion.

PROJECTED REVENUE GROWTH: Nearly 6 percent.
The state expects income tax revenue to grow by more than 8 percent. Because
the state has a highly progressive system, taxing high-earners at higher rates,
income tax revenue in New Jersey can grow faster than the economy as a whole.

TAXES: Christie has not revived a proposal to
cut taxes. He made a proposal to do so in 2012, but it was thwarted by
lawmakers. He has frequently talked of reviving the idea.

PENSION CONTRIBUTION: The state would make a
$2.25 billion contribution to the pension funds for public employees in the fourth
year of a seven-year phase in to meet the full obligation. Over the past two
decades, the state has often skimped on or skipped payments.

EDUCATION: The state's funding for public
education through high school — which makes up more than one-third of the
budget — would increase by about 4 percent. Christie says every school district
would receive increases — and not just the symbolic $1 increases that scores of
districts got last year.

LONGER SCHOOL HOURS: Of the education funding,
$5 million would be used to pay for local school districts' efforts to lengthen
school days or years. The money would be awarded through competitive grants.

HIGHER EDUCATION: Including aid to public
colleges and universities, student financial assistance and debt-service for
college-building projects, the state would put $2.3 billion toward higher
education, an increase of 7 percent.

HOSPITALS: Hospitals would get $985 million,
exactly the same amount in fiscal 2015 as they're getting in 2014. But there is
one slight shift — the charity care program would be cut by $25 million, and University Hospital in Newark would have its aid increased by the same amount.